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HST having greater impact on housing market than rising interest rates

TORONTO, Ontario, August 05, 2010 — A survey conducted by Royal LePage Real Estate Services revealed that Ontarians and British Columbians have misconceptions about how the Harmonized Sales Tax (HST) affects real estate transactions. When respondents were asked to provide examples of comments heard from buyers and sellers regarding the HST and its effect on the housing market, almost half of the comments (46.7 per cent) indicated that confusion about HST remains more than one month after its introduction.  Among the most common responses to the survey’s open-ended questions were that many home buyers incorrectly believe HST applies to the sale price of resale properties.

Nearly half (43.9 per cent) of the 765 REALTORS® polled in Ontario and B.C. said the HST that took effect in both provinces July 1 is having the greatest effect on the cooling residential real estate market, compared to just 28.4 per cent who cited rising interest rates as having the greatest effect. In all, more than 86 per cent of respondents said the HST is affecting their business somewhat.

The HST applies to the purchase price of a newly-built home, and fees for services and commissions associated with any real estate transaction, but it does not apply to the purchase price of resale homes.  Resale homes comprise the bulk of transactions in the Canadian housing market, and the majority of agents surveyed by Royal LePage indicated that new home sales account for less than 10 per cent of their business.

"We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. "According to our REALTORS® who work in B.C. and Ontario communities every day, misconceptions about the HST are having an effect on the market in both provinces."

Nearly one quarter (24.1 per cent) of respondents in the Royal LePage survey said home buyers and sellers have a low level of awareness about how the HST applies to a home sale transaction, while 44 per cent said buyers and sellers are only somewhat aware.

"While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term" said Soper. "REALTORS® are there to help guide buyers and sellers through the often complex negotiation and closing process, so our take-away from this survey is that we need to do more as an industry to educate consumers about the HST."

Results from the Royal LePage Real Estate Advisor Survey, conducted online at the end of July 2010, can be found below.

Survey Results

What impact has the introduction of the HST had on the real estate market in your region?

Significant impact: 36.5 per cent (279 responses)
Some impact: 49.7 per cent (380 responses)
No impact: 5.2 per cent (40 responses)
Don't know: 8.6 per cent (66 responses)

In your opinion, what factor has had a greater impact on the housing market's recent activity?

HST: 43.9 per cent (336 responses)
Rising interest rates: 28.4 per cent (217 responses)
Other: 27.7 percent (212 responses)

Based on your recent interactions with home buyers/sellers, please describe the level of awareness about the impact of HST on real estate transactions?

High level of awareness: 31.4 per cent (240 responses)
Some awareness: 43.9 per cent (336 responses)
Low awareness: 24.1 per cent (184 responses)
Don't know: 0.7 per cent (5 responses)

In the past three months, how often have new or prospective clients (home buyers or sellers) asked you questions about the HST and how it applies to a real estate transaction?

Many questions - I am asked frequently: 57.1 per cent (437 responses)
Some questions - I am asked occasionally: 28.8 per cent (220 responses)
Few questions - I have been asked only a few times: 11.9 per cent (91 responses)
No questions: 2.2 per cent (17 responses)

What percentage of your business is new home sales (as opposed to resale)?

None: 30.7 per cent (235 responses)
Less than 10 per cent of business: 53.9 per cent (412 responses)
11-25 per cent of business: 10.5 per cent (80 responses)
26-50 per cent of business: 2.9 per cent (22 responses)
51-75 per cent of business: 0.9 per cent (7 responses)
76-100 per cent of business: 1.2 per cent (9 responses)

News source: Royal LePage

 

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